Under our current plan the political horizon for euro
adoption is 2015, which means that we still have 18 months left
to do our homework and get
Lithuania ready for adoption.

We already have a formal structure in place within the
Lithuanian government that will carry on this process. We
have a committee consisting of the prime minister, the finance
minister and the chairman of the central bank, and in addition
we have two levels of working groups.

Rimantas Sadzius, Lithuanian finance
minister

One working group, led by the minister of finance, will be
coordinating the process, and below that there are six working
groups that will cover all aspects of the process both before
and after the EU approves Lithuanias application for
eurozone membership, including public information campaign.
This structure is already up and running.

What do you see as the biggest benefits for
Lithuania from euro membership?

There will be two main benefits. First of all, I expect to
see an improvement of the investment climate. The litas has
been pegged to the euro since February 2002, and not stepping
forward to full euro membership means that we still have to pay
up additional risk premium just for the fact that we have
differently named currency.

Until recently, of course, we did not comply with the
Maastricht criteria, but now we can say that the Lithuanian
economy has developed to the point where it is in a high state
of convergence with the eurozone countries, so if we make this
step there should be some reduction in risk premium and also
benefits for potential investors, in that it will be much
easier for them to calculate their financial flows.

Secondly, we will join this eurozone club as a full member
with full participation in decision-making, which is also
important for a country that joined the EU only in 2004 and is
keen to establish itself as a political player on the
international stage.

Euro adoption will mean that Lithuania has stepped up to
another level and joined the club of important countries, not
only in Europe but also worldwide.

Naturally we take all these developments in the eurozone and
the broader EU seriously and we participate in discussions on
how to tackle these crises. I would note, however, that
financial crises are not exclusive to the eurozone and that
banking problems can occur in any country. For example, in
Lithuania we also had two banks that needed state resolution
 which we managed to do without external assistance.

We also acknowledge the importance of developing necessary
legislation at the national and European level, and the files
related to the further work on the creation of the banking
union will be one of the key priorities for Lithuania during
the second semester of this year when we take the rotating
presidency of the EU.

I dont think there are many policymakers in Lithuania
who believe that the recent problems in eurozone countries are
specific to the eurozone or to the euro itself. It is obvious
that adoption of the euro doesnt in itself aggravate or
mitigate financial or economic risks.

European policymakers have sometimes reacted more quickly to
developing situations and sometimes less quickly. I would point
out, however, that so far all the crises  many of which
developed very rapidly  have been tackled or resolved in
one way or another. This proves that the structure for managing
banking and finance in Europe does actually work well.

Of course, one might have wished for better and faster
results in certain situations, but I dont see any
evidence of a crisis in European politics. There are problems
in individual countries that need addressing but overall
European politics is quite efficient.

Are you confident that you can persuade the
Lithuanian public of the benefits of euro
adoption?

Recent polls show that we have an almost equal number of
people in favour of and against euro, and the number against is
in line with that for other countries that have adopted the
euro.

More importantly, half of the population is still undecided
and I am confident that we can persuade many of those people
that the euro will benefit them and will bring many advantages
for Lithuania.

We realize that this is one of the harder tasks ahead of the
government but its one that we have to address 
its part of our necessary homework ahead of euro
adoption, and while it will be difficult I am convinced it is
possible.

Polls from other countries that have adopted the euro show
that people can be persuaded and that ideas can change rapidly,
so I am confident that we can engender a more positive attitude
towards the euro.

Has Lithuania considered the possibility of
abandoning the currency peg altogether?

For a small country with no real banking history and
traditions, moving to unpeg the currency would be absolutely
irrational and could have disastrous consequences. So the only
logical way forward is to replace the litas with the euro at
the rate that it has been pegged to.

How might Lithuanias economy be affected by
the choice of timing for euro adoption of other EU members in
the region?

I see it as beneficial for Lithuania that
Estonia has already joined the eurozone and that
Latvia has applied to join in 2014. Lithuania will then
close this gap and create a Baltic eurozone, so to speak, which
will enhance the regions appeal for investors, many of
whom already see the Baltics as a single region for
investment.

The economies of the three countries have many similarities
and theres a significant volume of cross-border trade, so
removing the currency split in what is a natural economic
region would be a logical step.

What is your response to critics who say that the
Maastricht criteria impose potentially damaging, short-termist
policies on vulnerable economies?

Our position is that the Maastricht criteria should be met,
which is why we have 2015 as our political horizon for euro
adoption. Certainly, attempting to meet the criteria by
artificial means can distort the natural development of an
economy.

On the other hand, when countries are assessed from the
point of view of the Maastricht Treaty, they are looked at
through the prism of sustainability of conforming with
Maastricht criteria. We want to have a sound economy with
stable development prospects, which is not distorted
artificially, and where inflation is brought under control
naturally.

Our top priority is stimulating the economy and creating
jobs, but of course we also understand that fiscal discipline
is a necessary prerequisite of the type of stable economic
growth that we are targeting.

What key steps or reforms remain to be undertaken to
ensure Lithuania does meet the Maastricht
criteria?

The simplest step is putting in place the requisite legal
framework, and we are working on that intensively. On the
fiscal side, we have had a fiscal discipline act in place since
2007, which ensures we keep our deficit under control, while on
the debt side our level of 40% of GDP is comfortably within the
Maastricht requirement of 60% of GDP.

Lithuanias long-term interest rates are on track to
meet the criterion. Inflation is a more challenging issue
because it is highly dependent on external factors, primarily
the global dynamics of food prices and of energy carrier
prices. Nevertheless, I am optimistic that we can meet the
targets within the current timeframe.

Do you have any doubts about the future viability of
the eurozone as a whole?

No, I have no doubts about the future prospects of the
currency. It is my personal belief, but one thats
supported by many objective facts, that the euro as a political
and financial project is viable, and that it can survive any
imaginable crisis.

Of course, there is still work to be done in terms of
putting in place the legal framework for banking union, and
also on the mechanisms for surveillance of the fiscal policies
of eurozone countries, but overall Im sure that the euro
will survive. It is beneficial for all the member countries but
also for the entire EU, and I think that it has proved its
worth as a major global currency.

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